Pandemic Bull or Bear market? Which one is it? The stock markets are soaring from their low points in March. How can it by that there are soaring stocks in the middle of a pandemic? Is it just a temporary soar or is it a more permanent trend? In more technical terms, are we in a bull or a bear market?
A bull market is a situation where the market is expected to continue to rise. A bear market is when the market has lost 20% and is expected to continue to fall. Think of it like this, a bull thrusts its horns upwards while a bear digs its claws downwards.
So where are we? In a Bull or a Bear market?
Bull Market or Bear Market
Since global stocks have jumped 23% since March, technically we are in a bull market.
Further argument for it being a bull market is that Bespoke Investment Group did the numbers for the US market and found that once equities have recouped half their losses, they won’t dip down to lower than those bottoms. In a sense, the market have tested the bottom end, and is now balancing.
However, there is one notable exception to the above analysis: The great depression. After the crash in 1929 the market bounced back 44% before sliding a further 80% at the beginning of 1930. If the current situation is like that we are in a Bear Market, and can expect further dips.
There are two main arguments that the bull rush we have seen is only temporary. The first is that there are automatic trading strategies that buy when volatility simmers down. The second is that there is clear connection between a stock market upturn and government spending packages.
Where does it leave the investor?
As an investor, big or small, where does it leave you? It leaves you in a difficult situation where you can either try to match the upwards trends that follows government spending packages. You can look at the long term, and think about what a stabilized economy will do in 2021 and further. Also, you can start looking at different investment opportunities, in such items as gold, crypto, forex, etc.
Overall, you should keep the wise words that Liz Ann Sonders of Charles Schwab & Co. in mind: “Anyone who thinks we’re going to keep moving up in a straight line is living in la-la land.”